On Tuesday, the House Oversight Committee held a hearing delving into the phenomenon of “environmental, social, corporate governance” (ESG) investing taking place among America’s leading financial institutions. Experts and lawmakers warned that the failure of investors to inform their clients about ESG investments is leading to opaque practices and economic loss.
One of the hearing’s witnesses was Mandy Gunasekara, director of the Independent Women’s Forum’s Center on Energy and Conservation, who contended that all three elements of ESG investing are detrimental for society in a variety of ways.
“While branded as an investment strategy for good, ESG manipulates markets as well as access to markets in order to advance a leftist political agenda. The ‘E’ standards result in higher cost energy, unreliable electricity grids, and stand to undermine environmental progress. The ‘E’ standards also enrich high-end asset managers at BlackRock, State Street, and Vanguard at the expense of retirees and pensioners. ‘S’ standards force companies to engage in controversial political issues such as campaigns to defund the police or promoting gender transitions in children, cultivating division in the workplace and the marketplace. ‘G’ standards give the appearance of diversity while restricting freedom of thought and competing viewpoints in the workforce. ESG standards are purposefully complex and convoluted in the hopes that the everyday man and woman will not catch on.”
Another witness was Jason Isaac of the Texas Public Policy Foundation, who described how ESG investment practices have kept the oil and gas industries from being able to acquire capital in order to expand production, forcing them to sell assets to other countries, which has wide-ranging consequences.
“Exxon [recently] sold assets in southeast Asia where they were going to produce oil and gas. I argue that they would have produced it more responsibly than anywhere else on the face of the earth, and who do they sell it to? PetroChina. That’s why I refer to the ESG agenda as the China ESG agenda. It does very little to help Americans. It does everything to help the Chinese Communist Party and making energy expensive, scarce, and government-controlled. And the numbers show that the China ESG agenda has been extremely effective at cutting off capital for businesses here in the United States. From 2015-2021 … there has been an 81% reduction in the number of funds that provide private capital raised for oil and gas exploration in this country. … This is just making energy more expensive, not only here in the United States, but around the world.”
Stephen Moore, an economist for The Heritage Foundation, further testified that the country’s large investment firms are not informing their stakeholders about the ESG investment decisions that they are making behind closed doors.
“If people want to invest their money in ESG funds … it’s a free country,” he said. “What I’m talking about is … companies like BlackRock and State Street voting on these resolutions without the knowledge of the clients and without their approval. That’s a big problem, and that’s where the fiduciary duty problem arises because they are lowering the return that they have in their retirement fund or whatever it might be. That, I think, is the heart of the matter.”
Rep. Lisa McClain (R-Mich.), a chairwoman on the committee, was equally alarmed by the implications of common ESG investing practices.
“If the client wants to purchase a fund that is ESG … then the client should have that decision,” she said during Tuesday’s edition of “Washington Watch with Tony Perkins.” “The issue is the fund managers should not use this as a political agenda and as a platform to push their agenda. The goal of the fund manager is actually to [provide a] return on investment. The issue that we have is this is all being done under the table in the cloak of darkness and it’s not transparent and they’re not being honest. And therein lies the problem. So I asked a question today, … [since] all these funds had to be ESG compliant, I wonder, could we use that same fund [so] that all these funds had to be pro-life? I mean, my goodness gracious, I think the other side would absolutely come unglued. But it’s the same thing, right?”
McClain went on to assert who is likely behind the nationwide ESG investment effort.
“I think it’s the collaborative efforts of the fund managers with the liberals on the Left trying to push their ideology … and it’s fear. Let’s also not forget that a lot of European investors are investing into these mutual funds, and they have a very different investment objective than Americans. Not saying that’s good or bad, it’s just different. My issue with this whole agenda is — just be transparent. And save it with the ‘ESG funds perform better.’ They don’t. We have the data that shows they don’t. Now, maybe your goal isn’t performance. Maybe your goal is to invest in funds that have ESG. Okay. But that’s the client’s decision, not the fund manager’s decision.”
Dan Hart is senior editor at The Washington Stand.
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